trivial payment

SomeUser

If you don't win on 8th Sept, at least get an open market annuity quote. Good luck

jamesd

It's not clear enough yet just what you have and what you did and that makes it hard for us to be sure that we are telling you the correct things.

You've mentioned what could be three different pensions:

1. A "voluntary contributions part"
2. Voluntary contributions are normally AVCs and linked to a defined benefit pension like final or average salary. Do you have one of these that was connected to the voluntary contributions?

I assume that those two are the "work pension".

3. The contracted out of SERPS money.
4. The annuity that is paying £36.99.

I assume that this is the "other" CIS pension.

fiesta1950 wrote: »

cis has told me I cannot take my pension for which I opted out of serps as a trivial payment as I am already in receipt of my voluntary contributions part of my pension plan.

When did they say that? It matters because the rules changed on April 2014 and a correct answer before then will be different from a correct answer after.

What was the approximate value of the SERPS pension pot at the time? Again this matters because we need to know the rules that apply. If it was a personal pension you'd have been able to take up to £2,000 as a cash lump sum before 6 April 2014 and up to £10,000 after provided that it was all the value of the pension pot. This isn't triviality but rather "small pots" rules.

There is also triviality. That had a maximum value for all pension of £18,000 capital value and if the value was under that it was possible to take it all out as a lump sum. The value of any workplace defined benefit pension is also considered for this. As with the small pots rule the limits for this increased on 6 April 2014.

In the 2014 Budget we learned that from 6 April 2015 it will be possible to take most pots as lump sums, without limit on value. The main exceptions will be workplace defined benefit pensions like final salary.

What we need to do is sort out what pensions you had in place before you were told things and did things, then what exactly you were told and how you acted in response what you were told, and when. If we can sort that out we can either tell you that CIS got it wrong or explain the rules that applied and why they got it right.

fiesta1950

Sorry I haven't replied recently but I have been ill and will read the posts as soon as poss. Thanks for all your help.

fiesta1950

I have a copy of the letter sent by cis which states because the voluntary part of my pension plan is already in payment, under the rules of triviality I am not eligible to claim the rebate part of my policy as a trivial payment.

Your_Hero

fiesta1950 wrote: »

I have a copy of the letter sent by cis which states because the voluntary part of my pension plan is already in payment, under the rules of triviality I am not eligible to claim the rebate part of my policy as a trivial payment.

Most probably because when you claimed in Dec 2013, the total value of ALL your pensions were already greater than £18,000 so you couldn't claim triviality. This has changed since April 2014 to £30,000.

jamesd

fiesta1950 wrote: »

I have a copy of the letter sent by cis which states because the voluntary part of my pension plan is already in payment, under the rules of triviality I am not eligible to claim the rebate part of my policy as a trivial payment.

Then I think that you were misled.

Your Hero speculates that it was because the total value was over £18,000 but that is not the reason they gave, so I do not think that is the reason, though the Ombudsman would have to eliminate that possibility. It would be moot if the value was no higher than £2,000 because the small pot rule would apply instead.

The relevant rule for triviality is that the triviality payment must extinguish all right sunder the "arrangement". An "arrangement" is a part of a pension pot and it is likely that they were tracking the rebate part as a different arrangement from the voluntary part. So they would have been permitted to pay you the rebate part under triviality riles if they were doing that.

Even if they had not originally had them under different arrangements, they may have split them into different arrangements when one part went into paying income and the other didn't.

There is however one combination of facts that would not have allowed it. If they had kept it all as one arrangement and put part of that arrangement into drawdown. There is a rule that an arrangement that has been crystallised, meaning lump sum or income taken, must be transferred in whole, so you may not have been able to transfer out in this case. However this seems unlikely because any income would presumably be coming from buying an annuity and would not be in the arrangement any more, so would not cause this restriction to be applicable. But if it was in drawdown rather than buying an annuity, the part in drawdown within the arrangement could not be split from the part not in drawdown in the same arrangement. Based on your descriptions I do not think that this is what happened but it is a case that the Ombudsman would need to eliminate.

Even if triviality was permitted they don't have to allow it, but to tell you that you couldn't do it at all was wrong since you could have transferred out to get it done even if they didn't want to do it themselves.

So overall I think that whatever happened, they misled you and that you would benefit by passing to the Ombudsman a copy of this whole discussion.

The Ombudsman would then need to establish how the various pension pots were divided into "arrangements" and whether taking the pot was permitted under tax rules because it was in a different arrangement. If it was in a different arrangement then taking it was permitted by tax law the Ombudsman would presumably want to form a view around telling you that you couldn't do it while you in fact could. If it was not a different arrangement the Ombudsman would need to determine that a transfer out was permitted and if it was, form a view about whether telling you that triviality was no longer permitted for the reason given was failing to give you correct information. On my understanding of the law, in each case the Ombudsman would find that you were not properly treated and would move on to deciding appropriate redress. Since any annuity would have been relatively recently purchased, unwinding the annuity sale would seem to me to be the best way to go.

Some relevant references include:

HMRC on "arrangements" in this context at RPSM09105485 http://www.hmrc.gov.uk/manuals/rpsmmanual/rpsm09105485.htm "As one of the conditions is that the payment extinguishes the member’s entitlement to benefits under the arrangement from which the payment is made but not necessarily their entitlement under the scheme as a whole, a member can take a small lump sum under Regulation 11A even though they may still have an entitlement to benefits under another arrangement under that scheme."

Pensions Advisory Service for an overview of the triviality process http://www.pensionsadvisoryservice.org.uk/media/956343/spot008%20trivialcommdetailed%20v1.7.pdf .

At this point I think we've identified the areas of uncertainty and possible incorrect guidance and after seeking clarification from the scheme the Ombudsman should have sufficient information to make a ruling.

Not that I am not an IFA or pensions professional, just someone who took the trouble to become familiar with the rules over the years of helping people here.

dunstonh

I cant see anything in this thread that suggests he was mislead.

One part of the pension is being paid under an annuity. it is an in-house annuity which suggests advice was not sought or given (unless there is a GAR, which there often is with CIS pensions). The other part has yet to commence. However, triviality cannot apply due to the one already in payment and potentially the amount (but we are still lacking so many facts).

The easiest solution of all is to wait until next April as triviality will be abolished at that point and the new rules will allow lump sum.

jamesd

Why do you think that having an annuity in payment can block either trivial commutation or a transfer out?

The only combination I can think of with that result would be them both in the same arrangement and I don't think that it's possible to have both lifetime annuity and uncrystalised funds in the same arrangement.

So far I see nothing that could cause "triviality cannot apply due to the one already in payment" to be true. So what am I missing?

Agree about lacking many facts but so far as we know the total value is under £18,000 so eligible for triviality.

dunstonh

The only combination I can think of with that result would be them both in the same arrangement and I don't think that it's possible to have both lifetime annuity and uncrystalised funds in the same arrangement.

CIS are usually different plans for contracting out and non-protected.

Agree about lacking many facts but so far as we know the total value is under £18,000 so eligible for triviality.

There has been no mention of the value of the commenced pension. I suspect that when you put the two together, they are above the triviality limit. This also may be using pre-budget figures as well given that it went to complaint, then adjudicator and now an ombudsman. That is a slow process normally.

SomeUser

This sounds like an "extinguishing" case.

A scheme doesn't HAVE to offer small pots. The HMRC rules are a guide and they don't override the scheme t&cs.

The key is all in the what was communicated to the member about the trivial commutation rules and what is actually in the t&cs. That will dictate whether there is a case or not. I refer back to my original post.

Anyway, transfer it out to another arrangement and then you can take it IF the only reason for non payment is because you currently have a pension in payment from the scheme (i.e. you satisfy all the other criteria such as amount).

SomeUser wrote: »

My interpretation is that there are 2 pots. One of these pots is currently being paid. Because you are receiving an annuity from the scheme, they've said you cant take the other pot as a lump sum and have given you an annuity quote of £37 per month. Is my interpretation correct?

Believe it or not, you may in fact have a case BUT you would need a copy of the original information from when you joined the scheme.

Legislation states that in order to qualify for a trivial commutation payment, the payment must extinguish all rights to the scheme.

This criteria may not have been well communicated. If it wasn't well communicated AND this specific "extinguishing" criteria is their only reason for their refusal to pay the money as a trivial commutation payment AND the terms and conditions of the scheme aren't clear on the trivial commutation rules of the scheme in relation to the "extinguishing" point, then you might have actually have a case.

HMRC rules state that if the scheme were to give you the money as cash despite you having an ongoing annuity with them bought from a different pot, a cash lump sum payment wouldn't be treated as an unauthorised payment (subject to various conditions, basically in line with trivial commutation rules with a few other ones) http://www.hmrc.gov.uk/manuals/rpsmmanual/rpsm09105460.htm. A scheme doesn't have to do this, hence why the T&Cs are important.

To put it another way, if the scheme t&cs don't specifically state anything about the extinguishing rule AND the communications implied that you would be able to take the money as a cash lump sum if below the limits and didn't specify or explain the the extinguishing point, then there is a strong argument that the scheme should pay it to you under the HMRC rule above.

However, with all that said, I've made a huge number of assumptions in this post, which may or may not be correct and it is not a substitute for legal advice. I am not a lawyer.